Welch v. Davis

• Decision Date: 10 June 2003
• Docket Number: No. WD 61089.,No. WD 61731.,WD 61089.,WD 61731.
• Citation: 114 S.W.3d 285
• Parties: Lantz WELCH, and Lantz Welch, P.C., Appellants, v. Grant DAVIS, Scott Bethune, Thomas Jones, Tim Brake, Tim Brake, P.C., and Davis, Bethune and Jones, L.L.C., Respondents.
• Court: Missouri Court of Appeals

114 S.W.3d 285

Lantz WELCH, and Lantz Welch, P.C., Appellants, v. Grant DAVIS, Scott Bethune, Thomas Jones, Tim Brake, Tim Brake, P.C., and Davis, Bethune and Jones, L.L.C., Respondents.

No. WD 61089.

No. WD 61731.

Missouri Court of Appeals, Western District.

June 10, 2003.

Motion for Rehearing and/or Transfer to Supreme Court Denied July 29, 2003.

Application for Transfer Denied September 30, 2003.

R. Lawrence Ward, Kansas City, for Appellant.

Richard E. McLeod, Kansas City, for Respondent.

Before RONALD R. HOLLIGER, Presiding Judge, PAUL M. SPINDEN, Judge, and JAMES M. SMART, Judge.

PER CURIAM.

This case involves consolidated appeals arising from a dispute over fees between Lantz Welch and his firm, Lantz Welch, P.C., and Tim Brake, Grant Davis, Scott Bethune, and Thomas Jones, attorneys who formerly practiced law in association with Welch's firm. The dispute centers on an agreement that Welch entered into with Brake on January 1, 1992. The agreement governed their association and said:

In the event this Agreement is terminated by either party, any law business may be withdrawn by [Brake] with the understanding that [Brake] shall first reimburse [Welch] any amounts of monies previously advanced by [Welch] on said matters, and it is understood by [Welch] that [Welch] shall not participate in any legal fees in said matters unless the fee therefore has actually been collected and is deposited in the accounts of [Welch].

....

Upon any dissolution of this Agreement, if there is any dispute concerning the matters covered by this Contract between the parties hereto, or their heirs or legatees, the matters shall be referred to a single arbitrator, if the parties or their representatives agree upon one; otherwise, to a board of three arbitrators, of which one shall be selected by each party or his representative to the difference and a third shall be selected by those two; and the decision and award of each single arbitrator or any two of such board, as the case may be, shall be final and binding upon said parties and their respective representatives.

Davis, Bethune, and Jones were not parties to this agreement or any similar agreement with Welch.

On December 5, 2000, Brake informed Welch that he was terminating the agreement and their association. In the letter, Brake said that he was withdrawing cases, which he identified in an attachment to the letter, and that he had agreed with Davis, Bethune, and Jones, that they would end their association with Welch and form a new law practice in which Brake anticipated having an association.

A dispute erupted between Welch and the new firm, Davis, Bethune and Jones, L.L.C., concerning legal fees in the cases withdrawn by Brake. The dispute centered on a case in which Davis, Bethune, and Jones, L.L.C., had earned approximately $12 million in attorney fees. After Brake informed Welch that he was withdrawing the cases, Davis sent the clients letters seeking their transfer of their cases from Welch to Davis, Bethune and Jones. In a letter to Kimberly Alcorn, Davis said:

Mr. Welch has announced that he is semi-retired from practicing law. I am writing to inform you that Lantz Welch will not be with our new law firm. I will be practicing with all the same lawyers except Lantz and the new firm name will be Davis, Bethune & Jones, LLC. I will continue to practice at the same location and my telephone and fax numbers remain the same. Mr. Welch can be reached at (816) 587-3773.

I, along with Tom Jones and Tim Brake have handled your case. We would like to continue to represent you. You are not obligated to have me continue to represent you. You can retain another attorney if you wish, including Mr. Welch.

If you want me to continue to represent you, please sign the enclosed letter indicating your desire. The amount of attorney fees you are obligated to pay will remain the same as the previous Contract of Employment of Attorneys.

Enclosed with this letter was a simple form for Kimberly Alcorn to sign. It said, "I would like for Tim Brake, Grant Davis, Scott Bethune and Tom Jones to represent me in my legal matter." Alcorn signed the form on January 26, 2001.

In April 2001, Welch sued, seeking an order to compel arbitration of the fee dispute among all parties, including Davis, Bethune, and Jones, and, in the alternative, for relief in quantum meruit. In response, Brake filed his own application to compel arbitration, but to exclude Davis, Bethune, and Jones as parties to the arbitration. The circuit court granted Brake's application. When the circuit court denied Welch's request that the circuit court reconsider its decision to exclude Davis, Bethune, and Jones as parties to the arbitration, Welch appealed.

On April 8 and 9, 2002, while Welch's appeal was pending, a panel of three arbitrators arbitrated Welch and Brake's dispute. On April 10, the panel issued its award for Brake. In a 2-1 decision, the panel found that Welch and his firm were not entitled to any of the law business withdrawn by Brake pursuant to the January 1, 1992, agreement and were not entitled to share in any of the legal fees paid in connection with that business.

On May 21, 2002, Brake, Davis, Bethune, and Jones filed in circuit court a motion for summary judgment on Welch's petition for relief in quantum meruit. The circuit court confirmed the arbitration award and granted summary judgment. Welch filed a second appeal.

The first appeal raises the issue of whether or not the circuit court erred in not compelling Davis, Bethune, and Jones to arbitrate the dispute that Welch and Brake had concerning their contract. Welch argues that the circuit court should have compelled Davis, Bethune, and Jones to arbitrate, even though they did not sign the contract, because they either were Brake's agents or were third-party beneficiaries to the contract.¹

Even if Welch is correct—and the record leaves much room for doubting that he is—we discern no prejudice to Welch resulting from Davis, Bethune, and Jones' not being compelled to arbitrate. Error without prejudice is not reversible error. Neavill v. Klemp, 427 S.W.2d 446, 448 (Mo.1968). The only prejudice that Welch articulates is that to "completely understand the factual basis and merits of [Welch's and Brake's] dispute over legal fees, Davis, Bethune and Jones [were necessary] parties to the arbitration of the dispute," and that he will be subject "to inconsistent results if this dispute is handled in different forums." He does not explain, however, why Davis, Bethune, and Jones' presence as witnesses at the arbitration proceeding was not sufficient to provide the factual basis. We do not accept the contention that compelling them to arbitrate was necessary to his establishing a full factual basis of his dispute with Brake. As for the inconsistent results, the results seem to have been consistent in this case, and, contrary to his concern, inconsistent results seems to be precisely what he desires: Having lost all to Brake, he is hoping to regain some of that loss from Davis, Bethune, and Jones. Even assuming that excluding Davis, Bethune, and Jones from the arbitration was error, it was harmless. Welch suffered no apparent prejudice.

In his second appeal, Welch challenges the circuit court's order to confirm the arbitration award. Our review of the circuit court's decision to confirm an arbitration award is governed by Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). We will affirm the circuit court's decision unless it is not supported by substantial evidence, or it is against the weight of the evidence, or it erroneously declares or applies the law. Heineman v. Charno, 877 S.W.2d 224, 227 (Mo.App.1994); Sheffield Assembly of God Church, Inc. v. American Insurance Co., 870 S.W.2d 926, 929 (Mo. App.1994).

Two different bodies of law could govern this dispute: the Uniform Arbitration Act, § 435.350 et seq., and the Federal Arbitration Act, 9 U.S.C. § 1 et seq. The latter applies to contracts evidencing transactions involving or affecting interstate commerce. Edward D. Jones and Company v. Schwartz, 969 S.W.2d 788, 793 (Mo.App.1998). The grounds for setting aside an arbitration award vary between these two bodies of law. The federal law provides more bases for vacating an award. We need not resolve this issue, however, because we conclude that the premises on which Welch rests for setting aside the arbitrators' award are incorrect.

Welch contends that the arbitration award should have been set aside because it purported to enforce an attorney-fee sharing agreement that was contrary to public policy and unenforceable as a matter of law. Welch argues that the award violated two rules of professional conduct, Rules 4-1.5(e) and 4-5.6.²

The claim appears disingenuous. In his first appeal, Welch complains that the circuit court erred by not compelling Davis, Bethune, and Jones to arbitrate under the very agreement that he now claims is void. Nevertheless, we consider his point.

Welch argues that his agreement with Brake violated Rule 4-1.5(e) because its allocation of fees did not take into account the proportion of services performed by each lawyer. The rule, however, imposes qualifications on the right to divide a legal fee only when "lawyers who are not in the same firm" divide the fee. Rule 4-1.5(e). A "firm" is a "[b]usiness entity or enterprise." BLACK'S LAW DICTIONARY 634 (6th Ed.1990). Brake associated himself with Welch in the practice of law at the law offices of Lantz Welch, P.C. Regardless of the nature of their business relationship—whether or not Brake was an independent contractor as Welch contends—they held themselves out to their clients and practiced together as a single, collective business entity. Welch's apparent belief that they were "not in the same firm" for purposes of the rule governing fee splitting is mistaken.

Welch also believes that his agreement with Brake violated Rule 4-5.6 because it restricted the right...